How to Pay Off Your Mortgage Fast

How to pay off your mortgage fast using Velocity Banking

This article will cover strategies on how to pay off your mortgage fast. In addition, the strategies presented here can also be used to pay off student loans, car loans, and credit cards.

What is a major benefit of Velocity Banking?

Velocity banking allows for rapid debt reduction, while also creating financial independence and increasing monthly cash flow.

What is one of the main reasons more people don’t take advantage of Velocity Banking?

The main reason more people don’t take advantage of Velocity Banking is that most people don’t know about it.

What is a key goal of Velocity Banking?

Velocity Banking has several key goals. Those goals include paying down debt, paying less interest, and responsible credit utilization.

What is Velocity Banking?

Velocity Banking is the use of readily available financial and banking tools to manage and increase cash flow, quickly create financial security, and dramatically reduce and minimize the amount of interest we pay.

Velocity Banking does not require users to increase their income to take advantage of it.

What tools are used in Velocity Banking?

The tools of velocity banking consist of credit cards, lines of credit, HELOC’s and purchase lines of credit.

How Velocity Banking Works

The first step in Velocity Banking is to identify and access cash flow. Next is to identify and access a Velocity Banking tool. Then you use Velocity Banking accounts to transfer debt from loans to lines of credit. As a result, you will increase cash flow to pay down lines of credit, retire other loan debt and generate more cash flow and leverage.

As a result, you can acquire new assets that have positive cash flow.

Interest Savings vs. Tax Deduction

	Person 1	Person 2
Income	$60,000	$60,000
Mort. Interest		$11,933
Taxable Income	$60,000	$48,067
Total tax paid (25%)	$15,000	$12,016
Difference in taxes	$2,984
Total Disposable Income	$45,000	$36,051
Financial Advantage	$8,949

Person 1 and Person 2 both make the same income. Person 2 pays $11,933 in mortgage interest. As a result, Person 2 reduces their taxable income to $48,067 whereas Person 1 has a taxable income of $60,000. Because the tax rate is 25%, Person 1 pays more in taxes then Person 2 with a difference of $2,984. Under those circumstances of taxes, Person 2 looks like they are in a better position, however when you look at the Total Disposable Income between Person 1 and Person 2, Person 1 has a total disposable income of $45,000 compared to the Person 2 with a total disposable income of $36,051. As a result, Person 1 has a financial advantage of $8,949.

Math and Interest

Velocity Banking is not magic, it’s math. In other words, it’s nothing more than simple math.

What is Interest?

Interest in money paid regularly at a particular rate for the use of money lent, or for the delay of the repayment of debt.

Similarly, interest is the cost for using someone else’s money or controlling cash flow.

In addition, interest is a gauge to your relationship with whom you are borrowing cash or credit from.

How the Wealthy View Interest

The wealthy view interest as a tool. The wealthy look to maximize the rate and the length of collection when acting as a lender. As a result of this, the wealthy look to minimize the amount of interest paid and limit the length of time it is in use when acting as a borrower.

The Average Retirement and Budget Plan

For the average person, they rely on the 40/40/40 Plan. This plan consists of 40 hours per week, for 40 years, to retire on 40% of income.

How most people live

The average American lives paycheck to paycheck. As a result of this, this is where you are today

The goal of using Velocity Banking is to create a paradigm shift.

Statistical Averages – Your Situation May Look Different

$5000 Combined Monthly Income

Loans – Home Loan of $200K for 30 years with a monthly payment of $1200 at 6%

Credit Card – $16K for 27 years (Wallet Nerd Average) with a monthly payment of $600 at 21%

Car – $13K balance with a monthly payment of $600 at 6%

Living Expenses – $2100

Not even 50% of Americans get $500 per month into their savings. For most people the number is Zero.

As a result, most Americans are burdened with massive amount of credit card debt.

Monthly Budget

Your Velocity Banking Plan – Your Pathway to Mastering Cash Flow

Velocity Banking does require that we have a knowledge and planning for the analysis beforehand so that we know the steps we are taking are going to give us our desired results.

The Six Steps to Creating a Velocity Banking Plan

Assess Current Situation – Budget
Identify the top 6 drains on cash flow
Identify emergency reserve
Select banking tool/Velocity Banking account
Open or start use of the Velocity Banking account
Repeat the cycle for additional debts or investments

Budget

Not only does a budget give us the status of where we currently are at and where we want to start from. A budget helps us know where we are to determine really where we want to be and to get there at the end.

To clarify, a budget is where we find the minute details of how to access more cash flow on a daily basis. The ability for us to increase our cash flow increases the speed and ability we have to pay down and reduce debt.

Specifically, we want to find out what is costing us the most money and taking it out of that velocity bank account every month or velocity banking tool each month that’s causing us to not take full advantage of the system.

Once you know what is draining your cash flow each month and you begin to become successful at eliminating debt, repeat it. Find another debt to take out. Find one of those top six drains on cash flow and you get rid of it. You get rid of one, you move onto the next one. Next thing you know, cash flow can literally increase in your life by not just hundreds but thousands of dollars in a very short period of time which translates to literally the savings in hundreds of thousands of dollars in interest. It’s completely up to you and how you apply the system and how you do it.

Definitions

HELOC – Home Equity Line of Credit
LOC – Line of Credit
PLOC – Personal Line of Credit
BLOC – Business Line of Credit
Interest – Gauge tool to know how we are doing and what we are willing to pay for use of money
Amortized Payment – Periodic payments that are applied to both the loan’s principal amount and the interest accrued

Immediate Financial Goals

Your immediate financial goals should be attacking debt now for cash flow.

What are the 3 largest payments (except home loan) that you want to eliminate?

What are the loan accounts where you are paying the most in high interest rates?

Reserve Types

Here are some examples of reserve types:

Savings account
Lines of credit
- Personal
- Home Equity
- Business
Credit cards
Investments
Retirement
Loans
Mattress money

What is your goal for reserve?

Where is it important for you to store it?

Tools and Banking Basics

What are the Velocity Banking Tools?

Credit cards
Line of Credit (Personal and Business)
2nd Home Equity Line of Credit (HELOC)
Purchase Lines of Credit (PLOC)

Where do all these tools come from? Banks!

The great thing about lines of credit accounts is that they have interest only payments. When used as a tool in Velocity Banking, this allows you to free up cash flow to attack debt.

Lines of credit are also liquid. Money can come in and money can come out. Unlike loans, when money is paid on a loan, you cannot get that money back.

Are you a going to be a part of the banking revolution?

We are going to change the way we use the tools that the bank provides to us to pay less interest and create cash flow. Everyone in America needs to know that there are better tools out there to help us manage cash flow and pay less to do more to really create that financial freedom we have talked about so much.

WARNING

Banks and service providers will advise/serve you at a level commensurate or equal to the level which you understand and can speak to the topics and financial tools in question.

It is our responsibility to understand and know how our money is working for us and working for other people.

Banking Basics

A bank is a business and not a charity
Banks will advise you and sell you on the products that make them the most money
Banks use the principle of segregation of income to increase their profitability
- Numerous separated and restricted accounts to minimize risk to consumer and maximize profits to banks
- Account types – checking, certificates of deposits, money market accounts

When we reserve that philosophy and concentrate all the power of our income into one area of one account, this is where the power of velocity banking comes to bear.

Velocity Banking vs. Segregation of Income

Amortized Loans

What is an amortized loan? An amortized loan is a type of loan that requires the borrower to make scheduled, periodic payments that are applied to both the principal and interest. Amortized loan payments first pay off the interest expense for the period; any remaining amount is put towards reducing the principal amount. As the interest portion of the payments for an amortization loan decreases, the principal portion increases.

Amortization of 30-Year Loan

As the graph above shows, the breakeven point is around 20 years

Amortization Formula (Payments)

Lines vs Loans

Lines

Simple interest calculated daily
Typically interest only monthly payments
Pay bills like a checking account (money comes in, money goes out)
The interest only payment is truly powerful in its ability to access cash flow for us

Loans

Amortized payment schedule
Scheduled term principal and interest payments
Cannot draw equity out

Lines vs Loans and Types of Credit

Lines

$18K limit
$16K balance
$600/mo payment
10% interest

Loans

$200K
30 years
$1200/mo payment
6% interest

If you take home $5000 per month in income, you want to have a velocity banking tool of at least $6000 of access to credit. Therefore, you can replace it, chunk it out, replace it, chunk it out.

Lines of credit are like a two-way street. You can put money in, and you can take money out.

Loans are like a one-way street. You can only put money in, you cannot take it out.

In simple terms, our money comes in through income. It is then applied to our line of credit. Our line of credit is then used to pay our expenses (clothing, food, car, mortgage, utilities).

It’s simply the movement of money through the banking tools that creates the interest savings.

Interest Formula (Monthly Interest Only Payment)

Features of Credit Card Accounts

Repayment is formulated by a percentage of outstanding balance
The repayment periods are a function of interest rate and outstanding balance (typically between 2 and 4$ of the outstanding balance).
Typically, higher interest rate
Difference between a debit card, credit card, and charge card
- Debit card comes out of checking or savings account
- Credit card is a line of credit and can carry a balance
- Charge card cannot carry a balance

Old Flow of Money

In the old flow of money, your money would come in through your income, then deposited into your checking account, and finally used to pay your mortgage and other expenses.

Velocity Banking Flow of Money

In the velocity banking flow of money, your money comes in through your income, then it is fully applied to your HELOC or Line of Credit, you then use your HELOC or Line of Credit to pay your mortgage and expenses.

When using a Velocity Banking tool, you want EVERYTHING funneled into one account. That way you get maximum benefit. And then as you pay your expenses out of that account, you start to move it. You want to use the big jackhammer when attacking debt. The big jackhammer takes big chunks out of debt and that is what you want to be working on.

What to Ask When Looking for a Line of Credit

What to ask when looking for my line of credit/Velocity Banking tool?

Do you charge an application fee?
Do you charge points?
Are there additional closing costs?
What is your approval time?
How far is you margin above prime rate?
What is the cap for the interest rate?
What is your maximum loan amount or LTV?
Is there a minimum that I must borrow?
Are my payments interest only?
What is the period of the loan in years?
Can I renew the line of credit?

A line of credit can cost you less money to originate then a loan. Our goal is to maintain our cash flow, so you’re really looking for those interest only products.

Additional Questions to Ask

Are there annual membership or maintenance fees?
Can I make withdrawals with an ATM/Debit card or a check book?
Can I make unlimited withdrawals?
Is there a size limit to withdrawals?
Is there a per transaction fee?
Am I required to take out an initial advance or drawdown?
Can I make unlimited deposit/payments?
Does the account have a direct deposit feature?
Is there a size limit to the size of the deposit/payments?

Which Velocity Banking Tool Will You Select?

Find out what is available to you based on your credit score, your assets, interest rate, and creation of cash flow. Select which account or debt you are eliminating first.

Always start with small principal balances first. Then move to the three highest interest, and finish with the highest balances.

Cash Flow Example

In this example, John has a monthly income of $5000 and no cash flow. John has the following loans: $16K balance on a credit card with a $600/mo payment at 21% interest, a car loan balance of $13K with a $600/mo payment at 6% interest, a mortgage of $200K with a $1200/mo payment at 6% interest for 30 years, living expenses of $2100 per month, and $500 per month going into savings.

John begins by applying for a Line of Credit that he will use as a Velocity Banking tool. He then proceeds to pay off his car balance of $13K, which would then eliminate the $600/mo payment.

John now has a monthly cash flow of $1100 by eliminating the $600/mo car payment and the $500/mo into his savings account.

After one month, John’s Line of Credit balance drops to $8K after depositing the $5K of monthly income. After paying all bills through the line of credit, the line of credit balance goes up to $11,900. John reduced a $1000 worth of debt the first month of operation.

Credit Card

Month two, John repeats the process. His Line of Credit balance drops to $6900. After paying all bills, the Line of Credit balance goes back up to $10,800.

John’s pay off time becomes 12-months. (Balance/Cashflow) ($13,000/$1,100)

John next moves onto to his credit card. He moves the $16K balance to his Line of Credit. He has now freed up an additional $600/mo in cash flow. The new cash flow is $1700. John has also been able to cut the interest rate of the credit card in half from 21% to 10%.

Pay off time 9.5 months ($16,000/$1,700)

Mortgage

Next, John begins to chunk his mortgage. He starts by moving $13K from the Line of Credit to the mortgage. John is currently paying a higher interest rate by the velocity and payment structure why which he is paying down the debt in the line of credit account, far outweighs paying the 4% difference in interest.

Pay off time: 7.6 months ($13,000/$1,700)

In 15-months, John will have taken $26,000 off his mortgage. this would eliminate 56 payments from his amortization schedule and took him down to 304 months or 25.3 years. At this point, John has saved nearly $50K in interest payments.

If John could prepay without penalty, John can continue that payment until the debt is reduced to zero.

Amortization Example

[$1,200(360)] – 200,000

Total interest = $232,000

By making that one $13K payment, John reduced his monthly payments to 304 and remaining principal down to $187,000.

[$1,200(304)] – $187,000

Total interest = $177,800

Calculate Pay Off Time

$200,000 mortgage/$13,000 Balloon = 15.4 balloons
15.4 balloons x 7.6 months = 117 months
117 months/12 = 9.75 years

This saved John 20 years over the life of his mortgage.

That is how you find financial freedom at an accelerated pace. That is where velocity becomes your ally where you are in control of the way you choose to pay interest and the way interest can work for you. And the way banking tools that are already provided for us are simply applied in our financial portfolio. You are in the driver’s seat.

By using the Line of Credit chunking method, John brought his 30 year 360 payments down to 117 payment and 9.75 years. This resulted in an interest savings of $133,119.

Chunking Steps

Step 1

To make sure that the chunk is directly applied to principal, there are steps that need to be taken.

If paying online, first log in, make your $1,200 payment. The log completely out. this will create in the banks computer system a separate transaction ID number. In other words, you’re not doing two actions in the same transaction.

You create a new transaction ID number, you log back in and then when it gets to the box and it says principal reduction for that month, that is where you put it in. And then you mark in the memo line Principal Reduction.

Step 2

24 to 48 hours after you have made that payment and it’s been drawn out of the account that it is coming out of, you’re going to log back in and make sure it’s been applied as principal reduction payment. If it hasn’t, you NEED to call your bank.

How to Pay Off Your Mortgage Fast Frequently Asked Questions

What do I do if I am at a negative cash flow position each month?
- Have the hard conversations to figure out where you can cut expenses. Figure out where you can create equity.
How would this system work for me if I get paid 100% commission or get paid irregularly?
- The system will work regardless however during bad months you may need to us the line of credit for your expenses.
What do you down when the Velocity Banking tool you have chosen has a 5- or 10-year term on it?
- You will have a decision to make you can sell the property, you can pay off the debt in its entirety or you can refinance.
Would I ever choose to get a regular loan after learning this strategy?
- The answer is yes or no depending on your circumstances.
What happens if the bank freezes the line of credit or cancels your credit card?
- You will need to go out and find a new tool. The process would be the same as if you had a term on it.
Shouldn’t I just refinance to a 10-year mortgage?
- No, you will pay more in interest.

How to Pay off Your Mortgage Fast F.A.Q’s Continued

What do I do if I have no debt and want to use Velocity Banking?
- Start buying rental properties.
Should you have more than one Velocity Banking account?
- No, you want the big jackhammer, not four little ones.
I have less than 10 years left on my mortgage, is it still worth converting to a line of credit?
- You will have to run the numbers and do the math as it may not be the right decision.
I already have a HELOC and/or a line of credit, do I need to get a new one?
- You need to ask the questions from earlier. Is it revolving, can I make unlimited number of payments without penalties, are there any fees or charges associated with maintenance of the account?
I can’t get a loan because of bad credit… what can I do?
- It’s time for you to take control and you can do it!

Two Ways to Generate Wealth

Working harder to earn or generate. With this you are limited on time and resources.

Create more by working harder to earn or generate finite or infinite wealth cycle.

Work smarter to maximize efficiency. Infinite returns as your cash flow and resources grow.

Conclusion

As you can see from what you have learned today, by using Velocity Banking through tools that banks are already providing you, you have found out how to pay off your mortgage fast, as well as other debts such as car loans, student loans, and credit card debt.

Learning how to pay off your mortgage fast is simple math and the right tool for your use.